First investment question

Seshwan

Hi all,

I made a thread last week with a few questions I had regarding openeing an ISA and investing. I am 23 years old.


I opened an ISA with Charles Stanley last week and have £1000 in there at the moment. I have been reading up on the Vanguard LifeStrategy funds and think I am going to with the LifeStrategy 80 fund first.

My question is around the fact that I know I need to diversify ( which investing in a fund is doing by default) but would it be silly to just put the whole 1000 into the LifeStrategy fund or woud it be worth starting off with two funds from the get go and putting 500 in the LifeSTragtegy 80 and then picking something elseo to put the other 500 on?

I know 1000 is pennies to most of you but it is all I have to start with at the moment and want to make the best decisions with it.

Thanks in advance

AnotherJoe

At these low numbers, given theres a cost to buy and sell i woudlnt worry about that, any advantage of diversifying will be wiped out by extra fund charges . Put it all in V.

FWIW ISTR that V is very diversified, it might not cover property but thats about it. So if you thought you should have 10% in property then you'd put £100 in a property fund, but thats not worth doing. You might also consider your house, if you have one, to be your investment in property so you are diversified anyway. If you dont have a house, well saving for one would be that investment in property. HTB ISA or a LISA the obvious choices.

Pincher

If you pay £50 in quarterly charge, and £10 dealing charge, you will need to get 6% return on £1,000 just to break even.

5% current account instead?

Seshwan

I was planning on making decent monthly contributions so I dont mind that I would barely break even with the 1k as I am really just doing this to force myself to actually start saving/investing.

My plan is to set up an automatided fixed contribution monthly and then see how much I can save throughout the month on top of that to maximize the contributions.

Is that a bad idea or just not optimal?

bigadaj

Pincher wrote: »

If you pay £50 in quarterly charge, and £10 dealing charge, you will need to get 6% return on £1,000 just to break even.

5% current account instead?

Csd direct is a percentage broker, so the OP has identified the right broker.

Their charges are typically 0.25%, so £2.50 a year. In addition there are the charges for holding vls which are similar.

I'd hope they would have easy access savings as well and be taking advantage of high interest current account, potentially with regular savers.

bigadaj

Seshwan wrote: »

I was planning on making decent monthly contributions so I dont mind that I would barely break even with the 1k as I am really just doing this to force myself to actually start saving/investing.

My plan is to set up an automatided fixed contribution monthly and then see how much I can save throughout the month on top of that to maximize the contributions.

Is that a bad idea or just not optimal?

That's fine, but you need emergency savings before investing, look at the 5% loophole article and thread for suggestions.

Seshwan

Ok thanks for this. Will read that now

ColdIron

With the VLS there is an annual % based fund manager fee of 0.24% that applies regardless of which platform you choose

With CSD there is an annual % based platform fee of 0.25% for funds

There are no transaction charges (cost to buy and sell) so it doesn't matter if you put your cash in all in one go or spread it across many transactions

With the sums you are talking about a single well diversified fund like the VLS is all you need unless you don't think that Vanguard's asset allocation meets your needs (hint, it almost certainly does meet your needs)

In summary, for small amount the single VLS fund with CSD is a reasonable combination

Seshwan

Great thanks for this, much appreciated.

Im just going to put it out there that I jumped right in and don't actually have an emergency fund... I plan to continue with this ISA and the monthly contributions seeing as I've opened it already and along side that start putting away an emergency fund.

I realise now that ideally I should have started with the emergency fund but not much I can do now.

bigadaj

Seshwan wrote: »

Great thanks for this, much appreciated.

Im just going to put it out there that I jumped right in and don't actually have an emergency fund... I plan to continue with this ISA and the monthly contributions seeing as I've opened it already and along side that start putting away an emergency fund.

I realise now that ideally I should have started with the emergency fund but not much I can do now.

That sounds fine, build up the emergency fund alongside the isa investment.

Do you have a work pension and contribute to it? At your age it would normally be recommended to contribute to a pension to make sure you get maximum employer contributions, anymore would only be worthwhile if you have smart pensions or salary sacrifice or are a higher rate taxpayer.

If you are saving for a property then most people would hold that money in cash, as investments are volatile and you could end up with less than you put in if you only invest for a few years.

Seshwan

I do pay into a work pension yes, not sure if it is the maximum so will find that out and increase my contributions if needed.

I am saving for a house but that is a long way off yet.. Will probably pay into my ISA monthly and then also save extra on the side for an emergency fund/house. I am fortunate that I do not have many monthly outgoings and also do alot of overtime at work so will not be an issue.

I currently only have 2 halifax accounts, a current account and an ultimate reward account. If I am planning on working on an emergency fund would you reccomend I go and find a better current account to use for it?